This year Celent surveyed technology providers that service wealth management firms. The goal of the survey was to learn the motivations and strategies of wealth management firms that outsource components of their business to third party vendors. The last time we did this survey was five years ago.

From the survey, we learned that one of the main drivers of outsourcing today is so wealth managers can experiment with the latest technology before committing vast resources to a technology that may only be a fad. Similarly, wealth management firms are eager to outsource because it allows them to scale up or down their operation, or enter new regions, quickly and efficiently. Wealth managers prefer to work with a technology provider to test ideas, tools and regions, before building a permanent team and spending on fixed costs.

Several motivations to outsource have become more important today than they were five years ago. These motivations include: to improve efficiency, to enrich the customer experience, and to respond to regulation. Over the last five years, across the world we have seen a push for more stringent regulation. Therefore, it is not surprising that regulation is top of mind for most wealth managers.

As products and services are increasingly commoditized, it is important for wealth managers to distinguish themselves via the customer experience. It is likely that over the next 12 to 18 months, wealth managers will spend relatively more time on outsourcing front office operations. For example, firms may look to vendors for improvements in: the onboarding experience, components of the advice and planning process, and help desk services.